Tax bill fails amid political 'tension'

Hartford - In an effort to help revenue-strapped municipalities such as New London, where nearly half the properties are tax-exempt, House of Representatives Speaker Brendan Sharkey, D-Hamden, proposed a plan that ultimately failed this legislative session to tax nonprofit hospitals and colleges.

The proposed legislation was watered down twice, and the House passed both versions. But neither version was called for a vote in the Senate, where the majority caucus - fellow Democrats - were strongly opposed to the plan.

"Our Senate caucus, when we discussed the bill, was not in favor at that late moment in the session of changing a very significant policy in the state of Connecticut, and that policy is - not to tax nonprofits," said Senate President Pro Tempore Donald Williams, D-Brooklyn.

The bill was bogged down by the fact that it proposed new tax policy, was widely opposed by nonprofit colleges and hospitals and was not openly supported by Gov. Dannel P. Malloy. In the end, the proposal became one of many study bills.

The bill may have also fallen victim to political tensions between the House and the Senate this session.

"It was a different atmosphere, that was for sure. I mean, there was tension, you felt it," said House Republican Leader Larry Cafero, R-Norwalk. "What we do in the last couple of weeks ? is you move bills, you have discussions, what about this one, we'll trade you this one for that one. There were no discussions going on."

Earlier in the 2014 legislative session, Democratic senators were dismayed by the fact that Sharkey had called their caucus leader's bill to ban genetically modified grass seed, only to have it defeated, said state Sen. Edward Meyer, D-Guilford. A speaker rarely calls a bill to the floor that he or she thinks will be defeated.

"That was a form of dissing the leader of another house," Meyer said. "And I thought it showed a very high level of integrity of Senator Williams. When he had the opportunity to kill the speaker's bill, he chose not to go in that direction."

Williams, the sponsor of the grass-seed bill, said, "The negative reaction to the idea of taxing nonprofits was so strong that some in the caucus wanted us to take the bill up on the floor and to vote it down, and I said that would not be the right thing to do, that is not how we operate in the Senate and that is not how we treat the caucus members in another chamber."

Although the tension between the Democratic Senate and House leaders was palpable, Sharkey said he didn't think the Senate's decision not to vote on a version of his nonprofit tax bill, often referred to as "reverse PILOT," had anything to do with the House's rejection of Williams' grass-seed bill. "I would just call it a lack of communication," he said.

"I take the Senate president at his word, that he did his best to try to get the Senate to agree to the very watered-down version of the reverse PILOT," Sharkey said. "I am not quite clear why individual senators would have an objection to providing property tax relief to their constituents and feel that perhaps protecting these large institutions like colleges and hospitals, major corporations in their communities ... that's more important than providing relief to their families and their constituents in the form of property tax relief."

Sharkey's initial bill would have allowed municipalities to tax nonprofit colleges and hospitals and required the state to reimburse the nonprofits a portion of the tax.

Proponents said today's nonprofits behave like corporations, offering six-figure salaries and rapidly expanding their facilities, so they should pay for municipal services such as police and fire protection. The tax idea was also appealing to municipalities, which receive only about 32 percent - rather than the mandated 77 percent - in Payment in Lieu of Taxes (PILOT) funds from the state for tax revenues they can't collect for tax-exempt properties.

The program has been flat-funded at $115 million for five years, but the General Assembly approved a $10 million increase for next year.

Nonprofit colleges and hospitals said paying property taxes would mean they would have to raise tuition and cut down on community services. The real problem, they said, is that the state doesn't keep to its commitment of funding the nonprofit PILOT.

Because the bill was controversial, the speaker diluted the initial PILOT bill into an amended bill, House Bill 5583, which would have required nonprofit colleges and hospitals that purchase taxable property on or after July 1 to pay taxes on that property. In another effort to get something resembling "reverse PILOT" to pass, Sharkey, with the support of Cafero, added an amendment to another bill, Senate Bill 470.

The amended bill would have allowed municipalities to tax one- to four-family residential structures at nonprofit colleges that were purchased as of July 1, 2015, if the municipality approves the tax change and the General Assembly approves the municipality's ordinance. The House passed each amended bill, but the Senate did not take either one up for a vote.

"Very few of these ideas get done in the first year," Sharkey said. "These are all ideas that oftentimes take two or three years to get vetted, and we'll obviously be continuing that fight."